Volkswagen pleads guilty in U.S. court in diesel emissions scandal

DETROIT/WASHINGTON (Reuters) - Volkswagen AG (VOWG_p.DE) pleaded guilty on Friday to fraud, obstruction of justice and falsifying statements as part of a $4.3 billion settlement reached with the U.S. Justice Department in January over the automaker’s diesel emissions scandal.

FILE PHOTO - A U.S. flag flutters in the wind above a Volkswagen dealership in Carlsbad, California, U.S. May 2, 2016. REUTERS/Mike Blake/File Photo

It was the first time the company has pleaded guilty to criminal conduct in any court in the world, a company spokesman said, and comes as the automaker strives to put the most expensive ever auto industry scandal behind it.

The September 2015 disclosure that VW intentionally cheated on emissions tests for at least six years led to the ouster of its chief executive, damaged the company’s reputation around the world and prompted massive bills.

In total, VW has agreed to spend up to $25 billion in the United States to address claims from owners, environmental regulators, states and dealers and offered to buy back about 500,000 polluting U.S. vehicles.

Volkswagen’s general counsel Manfred Doess made the plea on its behalf after he said at a hearing in U.S. District Court in Detroit that he was authorized by the company’s board of directors to enter a guilty plea.

“Your honor, VW AG is pleading guilty to all three counts because it is guilty on all three counts,” Doess told the court.

U.S. District Judge Sean Cox accepted the company’s guilty plea to conspiracy to commit fraud, obstruction and entry of goods by false statement charges and set an April 21 sentencing date, where he must decide whether to approve the terms of the plea agreement.

Investors in VW stock took the news in stride after the expected guilty plea, sending shares up slightly in Germany to close up 0.3 percent at 143.70 euros.

VW has agreed to spend up to $10 billion to buy back diesels that emit up to 40 times legally allowable pollution, along with at least $5,100 per owner in additional compensation.

Cox said he was considering a motion made by a lawyer for some owners on whether to allow additional restitution for victims.

“This a very, very, very serious crime. It is incumbent on me to make a considered decision,” Cox said.

The Justice Department and VW have argued that the automaker has already agreed to significant restitution.

“Volkswagen deeply regrets the behavior that gave rise to the diesel crisis. The agreements that we have reached with the U.S. government reflect our determination to address misconduct that went against all of the values Volkswagen holds so dear,” the company said in a statement. “Volkswagen today is not the same company it was 18 months ago.”

REFORMS

Under the plea agreement, VW agreed to sweeping reforms, new audits and oversight by an independent monitor for three years after admitting to installing secret software in 580,000 U.S. vehicles. The software enabled it to beat emissions tests over a six-year period and emit up to 40 times the legally allowable level of pollution.

An assistant U.S. attorney, John Neal, told the court that the emissions scheme “was a well thought-out, planned offense that went to the top of the organization.” He said VW could have faced $17 billion to $34 billion in fines under sentencing guidelines.

Volkswagen agreed to change the way it operates in the United States and other countries under the settlement. VW, the world’s largest automaker by sales, in January agreed to pay $4.3 billion in U.S. civil and criminal fines.

The company still faces ongoing investigations stemming from the excess emissions by the U.S. Securities and Exchange Commission, Internal Revenue Service and some U.S. states. New York Attorney General Eric Schneiderman told Reuters last month that there have been recent settlement talks, but didn’t elaborate.

The German automaker halted sales of diesel vehicles in late 2015 and has said it has no plans to resume sales of new U.S. diesels.

The Justice Department also charged seven current and former VW executives with crimes related to the scandal. One executive is in custody and awaiting trial and another pleaded guilty and agreed to cooperate. U.S. prosecutors said in January that five of the seven are believed to be in Germany. They have not been arraigned.

German prosecutors also have an ongoing criminal probe into VW’s excess diesel emissions.

VW Chairman Hans Dieter Poetsch said Monday the company expects to broaden disciplinary action beyond the two dozen employees it has already suspended.

As part of its U.S. emission settlements, VW agreed to spend nearly $3 billion to offset excess emissions and make $2 billion in investments in zero emission vehicle infrastructure and awareness programs over a decade.

Writing by David Shepardson in Washington. Additional reporting by Jan C. Schwartz in Hamburg, Germany; Editing by Bernadette Baum